The United States will be evaluating Pakistan’s response to the situation unfolding in Ukraine, said Christopher Wilson, the Assistant US Trade Representative for South and Central Asia, on Monday.
Wilson also urged the government to take steps aimed at stopping its departments from using pirated US-made software that were harming US interests. Pakistan’s biggest data hacking took place in August last year due to the Federal Board of Revenue’s decision to use pirated software.
In a virtual interaction with journalists after the 3rd round of Trade and Investment Framework Agreement (TIFA), Wilson said Pakistan’s economic relations with Russia did not enter into discussions, which were focused on the Pak-US economic relations. To a question whether the US would still trade with Pakistan if it goes ahead with plans to deepen economic ties with Moscow, Wilson said that the Office of the US Trade Representative focuses on trade and investment issues but not sanctions issues.
But “obviously we all will be evaluating the response of Pakistan and other governments to the broader situation unfolding in Eastern Europe”, said Wilson.
The US and the European Union have imposed sanctions on Russia aimed at crippling its economy. Pakistan is heavily reliant on the US and Europe for its trade and inflow of remittances. The EU remains the single largest trading partner of Pakistan as a block. “The US State Department has called for the need to show strong response against Russia, including economically,” said Wilson, and added Pak-US trade discussions were focused on taxation, transparency, good governance and intellectual property rights.
Total Pak-US bilateral trade is less than $8 billion, which the Assistant Trade Representative does not fully reflect the size of two economies. Christopher also said that unpredictable taxation policies of Pakistan were making the country less attractive for foreign investors.
“What we hear from the US investors that there is a general lack of predictability in applicability of taxes; there are often problems in payment of refunds and the concern is that there are frequent changes in tax arrangements that have the effect creating confusions among the investors and thereby diminishing Pakistan’s attractiveness as an investment locations.”
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The Federal Board of Revenue has been using taxpayers’ money to inflate revenues. A tractor manufacturing company has announced to shut its plant due to refund problems. After failing to achieve its targets for two consecutive months, the FBR also resorted to slowing down the release of refunds in February to achieve a low monthly target. Refunds payments in February were roughly 35% less than the same month a year ago.
Wilson said that a lot of trade barriers in Pakistan are related to lack of clarity in regulatory decision making, lack of predictability in taxation, insufficient protection in intellectual property and all of those difficulties are impacting investment climate. The US expressed concerns over extensive use of pirated software, including by government agencies. “The government should only use licensed software in government computers,” said Wilson.
He said that Pakistan and the US were holding discussions under the TIFA after several years and it is now important to effectively re-launch the TIFA process. The discussions were “very productive” and there was “good relaunch of the process that both the governments place a lot of value”, he added.
“Our visit is part of the process of reinforcing trade and economic dimensions between the US and Pakistan relationship. Both the governments share an interest in deepening the economic dimension of our relationship. We made a big start today,” said Wilson.
He said that Pakistan and the US did not discuss the bilateral investment treaty because the Biden administration is not actively pursuing the BIT negotiations with any country in the world.
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